Swedbank: Slight rise in real estate purchases outside Tallinn

Home-loans for real estate outside Tallinn and its environs have risen slightly in overall share, Swedbank reports.

While the majority (nearly two-thirds, at 60 percent) of total home-loans issued by Swedbank for the purchase of property in Estonia are for real estate in Tallinn and Harju County, this is still slightly down on the 63 percent share it stood at just four monhs ago, head of Swedbank's home-loans department Anne Pärgma told ETV news show "Aktuaalne kaamera" (AK).

Much of that growth relates to Pärnu County and to Viljandi, in South Estonia, which saw a one-percentage-point rise in share, while Tartu County remained unchanged.

"Other regions have grown at a slightly lower rate, but have still grown - that is, all over Estonia," Pärgma said.

One of the main factors is quite likely to be rising real estate prices in the capital and also a trend for longer-term home-loans, Pargmäe said.

The Covid pandemic has also seemed to have led to a period of reflection also and a greater likelihood of life outside the big city seeming more attractive, either as a main residence or as a second home, she added.

The current situation is somewhat reminiscent of that back in 2007-2008, she added, with the difference that in the past year, only just over half (53 percent) of real estate transactions are based on a home-loan, compared with nearly 100 percent 15 years ago.

"Perhaps it could be stated that the risk of borrowing and buying real estate is more evenly distributed," she said.

The downturn of 2008-2010 hit Estonia's real estate market particularly hard and also led to a tightening of home-loan requirements for borrowers.

Twice as many house purchases (61 percent of the total) were based on loans, however, as apartment purchases (30 percent), Pargmäe went on.

Other changes in recent years include a relative fall in borrowers under 30 as a trade-off to a rise in the over-40s demographic.

The share of home-loans taken out in two peoples' names has remained relatively stable, falling by just one percentage point, to 41 percent, in the past year, Pargmäe  added.

Another development is that people seem more willing to pay over the market value for properties.

"It's just a matter of emotions. And the amounts are not small at all, which is surprising," she said.

Banks will nonetheless base their loan on the lower, i.e. market value, rather than the sale price, Pargmäe added, with self-financing making up most of the difference, Pargmäe said.


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Editor: Andrew Whyte

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